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Ruiz testimony continues in AEA fraud case
PHOENIX — 8:45 p.m. update - On the stand Thursday in the trial of a former AEA official, businessman Frank Ruiz described a series of loans and loan additions he obtained even though he neither asked for nor wanted the money, ending up millions of dollars in debt.
In one case a loan originally for $21,000 in February 2008 had ballooned to $1.2 million by May 2009. According to court documents, William Liddle, business loan manager for AEA Federal Credit Union, signed all of the loan modifications except the last one, which was signed by then-CEO Ken Bredemeyer.
Asked why he signed the promissory notes anyway, Ruiz responded, “Because Mr. Liddle asked me to and I trusted him. I thought it must be a good idea.”
Liddle and his wife, Rhonda, are on trial in U.S. District Court in Phoenix. The Liddles face 68 counts of money laundering, fraud and conspiracy in a case that involved millions of dollars in bad debt for the credit union and led to its insolvency.
Ruiz was a co-defendant in the case but reached a plea agreement in June in which he agreed to testify against the Liddles in hopes of getting a lighter sentence.
Ruiz also testified that at Liddle’s suggestion, he purchased a home at 1401 Parkway with a $429,000 commercial loan in August 2007. He got a commercial loan because he had a negative net worth and wouldn’t have qualified for a real estate mortgage, he explained. Besides, he already had a home and a mortgage.
Todd Burch was the Realtor, Ruiz said, adding that he didn’t look at other homes and bought this one because Liddle thought he should. Ruiz never lived in the house.
The ink was barely dry on the loan document when Liddle sent him an email with suggestions for new tile, Ruiz said.
A short time later, Liddle and his family moved in with a lease that said they would pay $3,500 a month rent with an option to buy. Ruiz testified that he received three checks written by Rhonda Liddle for a total of $9,500, the last one in March 2008. He said he never received another payment from the Liddles for the house.
At Liddle’s direction, Ruiz said, he was making the payments by taking the money from other loans.
The Liddles also undertook a major remodel of the home, for which Ruiz was asked to make cash payments to the subcontractors so there would be no paper trail.
It didn’t come out during Ruiz’s testimony, but as part of the indictment of the Liddles and Ruiz, it was charged that Ruiz gave the Liddles more than $1 million in cash and a home in a kickback scheme to obtain $22 million in AEA loans approved by Liddle for various businesses.
Ruiz also testified that Liddle convinced him and a former partner, Shelby Carl, to buy the Kress, a historic building in downtown Yuma, and later to take over the property for a partially developed entertainment center named the Zone.
Those businesses included Yuma Fun Factory and Top of the Kress as well as an entity called CTW that served as a catch-all for various loans. With the money from the CTW loans, Ruiz testified, he purchased four reserved season seats to San Diego Chargers games, bought a car for his son and purchased a custom limousine.
Ruiz said Liddle promoted the idea of the limo for business purposes for Top of the Kress and Yuma Fun Factory even though it would be several months before either project would be completed.
Ruiz also testified that the limo never was used for business purposes but for his and Liddle’s personal use, such as to go to the Chargers games and to travel to Phoenix and Las Vegas.
The limo currently is parked at his house because it is tied up in his bankruptcy, Ruiz said.
A month after the Yuma Fun Factory opened in late May 2009, Ruiz testified, Liddle told him he wanted him to sell out to someone else because Ruiz had so much debt on the books and the bank regulators were coming. So in June, Dan Thelen purchased the property, taking on the debt and paying Ruiz and Carl each $50,000.
Less than a year later, Thelen closed the family entertainment center, owing $15 million.
Ruiz testified that Liddle was frequently on site at the Yuma Fun Factory and Top of the Kress while they were being developed and was the one who selected the restaurant tenant, architect and general contractor for both of them.
In addition, evidence was produced of a business card for William Liddle with the logo for Desert Best Enterprises, the company under which Ruiz developed the two projects. The card listed Liddle as chief financial officer. The same was true for a promotional booklet Liddle had produced to find a restaurant for the Kress, Ruiz said.
Da Boyz, a local Italian restaurant was selected. Da Boyz also had the food concession at Yuma Fun Factory for a while. Quality Development was the general contractor for both projects.
Ruiz will continue to be on the stand Friday.
PHOENIX - 4:45 p.m. update - Testimony has concluded for the day in the AEA fraud trail.
The focus as the afternoon concluded was on Frank Ruiz’ CTW loan history, which included numerous loans and loan modifications – modifications Ruiz testified he didn’t ask for or need, but signed because William Liddle told him to.
CTW is the corporation that Ruiz formed which wound up being a catch-all for a variety of transactions, including the Long Bar, which he purchased from Dan Thelen. Ruiz also used funds from the CTW account to buy San Diego Chargers season tickets, a limo and a vehicle for his son, as well as a second house for himself, according to Ruiz.
PHOENIX - 3:05 p.m. update - Testimony this afternoon has focused on the increasing amount of debt Frank Ruiz amassed through loans issued from AEA Credit Union.
Shortly after opening the Yuma Fun Factory, Ruiz testified that William Liddle said Ruiz needed to sell the facility, because the regulators were coming, and Ruiz needed to lessen his debt.
At that point, Liddle arranged the sale of the Fun Factory to Dan Thelen.
Ruiz also testified that he purchased a home for almost $500,000, at Liddle’s suggestion, which the Liddles moved into shortly thereafter. The Liddles were supposed to pay Ruiz $3,500 a month in rent.
Ruiz testified that he received a total of three checks, but that was all the money he received for the house.
PHOENIX - 1:20 p.m. update - In the second segment of testimony today in the AEA fraud trial, the focus turned to Frank Ruiz’ business loans.
Ruiz testified that Desert Best Enterprises was formed in August of 2006. Ruiz said it was William Liddle’s idea to form it, that way Ruiz and business partner Shelby Carl could get more loans and spread it out over another company. And, it could also be a holding company to acquire property and future development.
Ruiz testified that the loans started coming - including a loan for $880,000, which was used to purchase property for a new headquarters for Desert Best Distributing.
Then there was a second loan for $50,000 for working capital, which Ruiz testified that he didn’t ask for, and didn’t need - but signed for it anyway.
There was a third loan for $394,500, which was used to pay off Desert Best Distributing’s debts, and transfer assets from Desert Best Distributing to Desert Best Enterprises.
That loan, Ruiz testified, was modified a little later to $620,000.
In May of 2007, Ruiz took out another loan for $2.7 million to buy the Kress building.
Ruiz testified that this was Liddle’s idea. Liddle found a historic building downtown which he thought would be great for Ruiz and Carl. Ruiz said Liddle suggest he turn it into a restaurant downstairs, with a nightclub upstairs - an arrangement Liddle said was popular in Asia.
The actual purchase price of the Kress was $1.5 million, and according to Ruiz, Liddle handled all the negotiations of the sale.
That loan was also modified, Ruiz testified, in November of 2009 to $7.2 million.
Around this time, Ruiz said, he and Carl went separate ways. Ruiz got Desert Best Enterprises, while Carl got Desert Best Technology.
Ruiz testified that he didn’t understand how the debt had grown so much at this point.
Ruiz claimed that Liddle found the tenant - Da Boyz Restaurant - for the downstairs portion of the property. He also testified that Liddle negotiated the architect and the contractor as well.
However, they put that project on hold, because Liddle had another idea for him - to take over the Zone, which later became the Yuma Fun Factory.
Ruiz testified that a construction loan followed to buy the property for the Yuma Fun Factory, for $1.6 million.
Again, Ruiz said that Liddle was the one who found the restaurant, architect and the contractor, all of whom were the same as the Kress.
According to Ruiz, Liddle was on site every day for hours at a time, directing the contractors.
During the testimony, Ruiz showed a business card and pamphlet that had the Desert Best Enterprises logo on it, with William Liddle listed as the chief financial officer.
The court has adjourned for lunch. Check back with YumaSun.com for more updates this afternoon as the trial continues.
PHOENIX – 11 a.m. update - Frank Ruiz continued to testify today in the AEA fraud case.
This morning’s testimony focused on how Ruiz met William Liddle, the AEA loan officer currently on trial. Ruiz said he worked with the Small Business Development Center to develop a business plan, and then he and his business partner, Shelby Carl, went to AEA Credit Union to get a loan. At that point, Ruiz met Liddle, in March of 2005.
Carl and Ruiz got a series of loans doing business as Desert Best Distributing, a janitorial supply company.
Ruiz testified that the loans were in small amounts, and there were several loan modifications, which kept raising the amounts. Ruiz testified that he didn’t request the modifications or need them.
However, Ruiz testified, he signed the modifications because Liddle asked him to, and he trusted him.
Ruiz and Carl decided to form another business, called Desert Best Technology. They wanted to buy the distribution rights to a sanitizing chemical, to build upon Carl’s background in chemistry. Ruiz testified they got a loan for $1.5 million in 2007.
Ruiz said that as these loans amassed, neither company was ever profitable, and they continued to exist off their AEA money. In the end, Ruiz testified, they filed for bankruptcy.
YumaSun.com will be posting updates from the trial throughout the day. Check back in as this story unfolds.
The trial in U.S. District Court in Phoenix is of William Liddle, former business loan officer for AEA, and his wife, Rhonda. The Liddles face charges of conspiracy, fraud and money laundering in a case that resulted in millions of dollars in bad loans for the credit union and led to its insolvency.
Ruiz was also indicted in the case but reached a plea agreement in June.